I.

AUDIT PLAN
1.Business environment risk
Although there is a strong growth momentum, the technology distribution
industry is suffering from great competition among distributors and between
distributors and retailers, as well as facing the risk of price fluctuations.

According to experts, the business risk when operating technology distribution

now depends on a large manufacturer or retailer. For example, Digital World Joint
Stock Company (Digiworld) has suffered from Nokia mobile distribution business
when the manufacturer announced to stop production. For technology retailers,
the risk comes from the financial problem when the cost of developing the retail
chain is high. Especially the risk of business when the level of competition in this
industry is very large because there are 10,000 technology retail points in
Vietnam market. Meanwhile, the service provided among retail units in the
industry is not too different. In fact, the fact that retailers participate in direct
distribution from manufacturers will face many risks such as price fluctuations
due to longer import time from manufacturers. The delay in the import of goods
will put retailers at risk of price fluctuations, technological changes, changes in
consumer trends.
In fact, the fact that retailers participate in direct distribution from manufacturers
will face many risks such as price fluctuations due to longer import time from
manufacturers. The delay in the import of goods will put retailers at risk of price
fluctuations, technological changes, obsolescence, changing consumer trends.
Inventory turnover will tend to slow down, This is equivalent to Binh Anh Co.
In addition, retailers are less likely to perform logistics operations as well as
distribute new items in the market due to low brand marketing capabilities.
In this case, the company must make provision for devaluation of stock.

Ignoring some shareholders’ protests, despite of the poor performance in sales,

Binh Anh still made decision to extend some new stores in small cities. It means
that the company has more likelihood not to sell inventories and face a huge
amount of losses in these new stores.
2.Risk profile for the organization
- The company now has a large number of shareholders, which creates a
significant pressure on both the company and especially the management
that they must always make the fiancial statement better, this can be lead
to risk of fraud that management tend to make the dishonest financial
statements.
- This is the first year the company was audited by AIC. There is not much
information about the company and its credibility. The risk of money will be
set at a high level, the beginning balance should be carefully considered.
- The company's manager really did not care about inventory control. The
classification of inventory will affects the business performance. The
camera system has not worked for moths, there is no restriction for
entering warehouses. The effectiveness of physical control being very low
will create a high risk of fraud.
- The company purchases goods from a lot of foreignsuppliers.This will
happen in terms of quality control and shipping
- Binh Anh has many store in big cities. This company must have good
lcorporate lgovernance to operate and control it well. Risk of ability to
manage the company must be considered.
- Inventory is not classified reasonably according to the descriptions, so it
take to much time for storekeeper to find out the right things that
customer want to buy. The camera system has not worked for moths, there
is no restriction for entering warehouses. This will create a high risk of
fraud and affects the business performance.
- CFO lis lresponsible lfor lapproving lall lthe lpurchase lorder. Approval
should have a specific function department. Only one person lmay lnot
lhave lenough lskills land lexperience land in some cases fraud can be
happen.
- The prenumbered receiving report is prepared with a copy sent to
accounting by receiving department. Other departments like lPurchase
ldepartment, lWarehouse land lAccounting ldepartment should be receipt
the copies. Without checking and comparing, the risks of fraud is that staff
can create the copy for personal benefits.
- Sometimes goods received cannot be examine fully by the receiving
department due to lack of personal, this leads to omission of errors, even
fraud.
 - ’The lgoods lare lkept lwithin lthe lwarehouses lbelow lsolely lthe lcontrol
lof lwarehouse lmanager. lOnly lwarehouse lmanager lupdate lthe
lperpetual lrecord, land luse lit lto lwork lout lthe lreorder lgoods. This
create a good oppoturnity of fraud.
- Only quantities but no qualities are considered.
It would be dangerous if the company did not know about the status of the
goods. Risk thatt Inventory lcan be mistated Or the risk of fraud that
inventory can be intentionaly exchanged.
- Because the records is perpetual, but the company counts and reconciles
with inventories each year. Therefore, some differences may not be detect
timely, leading to some of them obsolete, differences at the year end
significant which have a huge impact on Financial statements.
- ’Payable laccountant lcompare’vendor’s linvoice lto lthe lacquisition order.’
Risk lof linappropriate lrecording. Company should compare Vendor’sl
invoice to Receiptlreport,to Purchase order.
- There is an inherent risk related to the accounting softwares. The
comparing and recording are done by the assist of accounting software and
the checks and updates the cash disbursements journal are also done by
the sames. If it has the mistake in any steps, It will affect lto loverall lFSs.
- ’In April and December 2018’the payment to suppliers approved lby
lthe’Chief accountant as the CEO went away.’ This is a kind of risks of fraud
that accountant and chief of accountant may have opportinities to collude
together to steal money.
- The monthly lbank lreconciliation from lthe lbank is directly sent to The
chief accountant for checking and recording. It lmay lraise lthe lrisk of
fraudlas Cheiflaccountantltakes both the duties of recording and reconciling
Bank.

3. PRELIMINARY lANALYTICALlPROCEDURES
Year Ending 31 December 2018 2017 2016
Turnover 44540 42920 40012
Gross profit 7078 7140 7423
Net profit before tax 519 1150 1201
Total assets 27727 25136 24500
Current assets 16360 13190 12267
Current liabilities 16167 9581 8905
Inventory 11172 8215 7577
Current ratio 1.01 1.38 1.38
Quick ratio 0.32 0.52 0.53
Net working capital 193.00 3609.00 3362.00
Net working capital to
total assets 0.01 0.14 0.14
Day's sales in receivables 0.01 0.01 0.01
Net working capital
turnover 230.78 11.89 11.90
Total asset turnover 1.61 1.71 1.63
Cost of good sold 37462 35780 32589
Inventory turnover 3.35320444 4.355447352 4.301042629

- It indicates that lCOSG increased during the period, raising a problem about
lvalue of inventory’’
- Net lprofit lbefore ltax ldecresed lsignificantlylin 2018. Auditors should
lperform ladditional procedures to obtain the reason.’’
- Quick ratio, as well as current ratio decreased during 3 years, so the
company may have difficulies in meet short-term debts.
- Inventory tunover declined and days to sell inventory increased, the
company may have trouble in selling inventory, slow moving condition and
leading to obsolete inventories
- lNWC lturnover lincrease lsignificantly lin l2018. lBut lon lthe lother’hand,
lworking lcapital is too low lcan lpossibly lcause lbusiness lthe problem of
running out money to fund their operating activities
NWC lto ltotal lassets lreduced lin l2018 lindicates la ladverse lpoint lrelated
lto the lweakness of’liquidity land lfinance.

4. AUDIT SCOPE
lAudit lscope based on riskiest areas
- Inventory systems, include the entire inventory controls,the related
departments and its activities: checkingcontrols include restriction of
access, documentation and authorisation of movements, review of
inventory condition and independent inventory accounting.
- Account payable, purchasing and making payment, auditor should consider the
entire purchase system and the relates departments. Its activities will consist of
checking the process and authorisation of buying, custody, recording and making
payments.

5. AUDIT MATERIALITY
During planning, the auditor must esteblish materiality for financial statements ad
a whole and then set the performance materiality levels.
+ We have several benchmarks for determining the materiality as a whole
Financial statements:
Criteria % Value ($)
Profit before tax 5-10 25,950-51,900
Gross profit 0.5-1 35,390-70,780
Revenue 0.5-1 222,700-445,400
Total assets 1-2 277,270-554,540

Because Binh Anh Co is a commercial company and has 60 shareholders, the

shareholders are most likely to be interested in how much they receive dividends
from profit before tax. Therefore, profit before tax is the primary benchmark for
deciding what material for this company.
Because there are a high level of audit risk in this situation and the number of
shareholders may be affected by the risks is large, the planning materiality needs
to lower, at 5% ( or $25,950), to reduce the levels of overall detection risk in order
to reduce overall audit risk back to accepted levels.
+ We have to calculate performace materiality: Planning materiality only to detect
material misstatements alone leads to ignoring the cumulative effect of single
imateriality can make financial statements contains material mistatements. A
performance materiality is a value determined by an auditor to reduce the
likelihood that the combined effects of unrecognized errors exceed the planning
levels for overall financial reporting down to a reasonable low level. Similarly, the
performance materiality is defined for the group of transactions, account
balances, or disclosure information also given to reduce to the acceptable level.
Performace materiality will be usually set at 70% of planning mareriality, or 70%
of $25,950, equal $18,165
II. AUDIT PROCEDURES

INVENTORY
PURPOSE OF TEST OF POTENTIAL SUBSTANTIVE
INTERNAL CONTROL FINANCIAL AUDIT
CONTROL MISSTATEMENT PROCEDURE

1. For a proper Examine receiving Misstatement of Compare

valuation and requisition inventory. physical count
of inventory. documents, trace to perpetual
(Accuracy) to perpetual inventory
records. record

2. To ensure Account for a Understatement Trace quantity

inventory numerical of inventory or and description
is recorded when sequence of payment for on vendor's
received, receiving reports goods not invoice to
payments and observe received. receiving
made are for matching invoices report.
goods received from
received, and vendors.
quantities
and descriptions
are
accurate.
(Completeness,
existence and
accuracy)

3. To minimize Discuss with Overstatement Compare

theft or client and of inventory. physical count
unrecorded observe whether to perpetual
shipments personnel records.
of inventory. prepare shipping
(Existence) documents.

4.To ensure Account for Understatement Trace quantity

inventory a numerical of sales. and descrip-
shipments are sequence of tion on bills of
recorded as sales. shipping orders. lading to
(Completeness) recorded sales.

5. To make sure Observe counting Misstatement of

physical personnel and inventory. Compare
inventory counts discuss with physical count
are client. to perpetual
accurate. inventory
(Accuracy, record.
existence
and completeness)

6. To assure Review Misstatement of Trace costs

reasonable procedures inventory. from supporting
costs are used for for determining documents to
inventory and cost standard costs. development
of goods sold. of standards.
(Accuracy)

7. To make sure Read policy Misstatement of Analytical

obsolete and discuss inventory. procedures for
goods are procedures with inventory.
classified client.
as such.
(Accuracy)

8. To make sure Observe who Misstatement of Reperform

inventory compiles the inventory. clerical tests
compilation is inventory and of inventory
accurate. discuss with compilation.
(Accuracy) client.
 DEFICIENCIES
The ldecision lof lmanagement lwas lstill
limplemented lalthough lshareholders’s linterest
lwas lnot lsatisfied.’’
CFO lis lresponsible lfor lapproving lall lthe
purchase lorder.’’
‘’
In some certain stiuation, receiving
department did not examine properly good
receipt.
The lgoods lare lstored lin lthe lwarehouses‘under
only lthe lcontrol lof warehouse manager.‘Only
warehouse lmanager lupdate lthe lperpetual
record, land luse lit lto‘’ ldetermine lthe lreorder
good llevel.’’
No quality consideration
The variance between results of physical count
and inventory section in the balance sheet is
automatically treated as operating expensens
Payable laccountant‘’compare‘’vendor’s
invoice‘’to lthe lpurchase lorder.’’
In lApril land lDecember l2018, lthe lpayment lto
suppliers lapproved lby lthe‘’Chief laccountant as
the’CEO lwent laway.’’
The monthly lbank lreconciliation from lthe lbank
is directly sent to The lchief laccountant for
checking and recording
The lmonthly laccount lpayable llisting lis lnotlused
lin lthe lcompany, lthus lthe ldifference’in ldate
lbetween lthe lbank land lBinh lAnh lis difficult lto
lbe ldetected’’
TEST lOF lCONTROL
Review lthe lMinutes lof lBoard lMeeting, ltest lwhether
all lthe ldecision lof lBOM lwere lcarefully lconsidered
and lapproved lby lBOD. lObtain lthe lreason lfrom
Manager lfor lany lunapproved ldecision.’’
Inspect lpurchase lorder. lIf lthe lcontrol lis leffective,
Purchase lmanager lshould levidence lhis lapproval lby
way lof lsigniature lon leach lorder’’
’
Enquiry lof lstaff lin lreceiving ldepartment labout lthe
process land lthe linstruction lof lreceiving lgood lthat
they lare lfollowing. l
Inspect la lsample lReceiving lreport, lexamine lthe ltrace
of lapproval, lthe lname lof lresponsible lstaff. Enquiry
responsible lstaff labout lthe lprocess lof lreceiving
good’’
Enquiry lthe lManager labout lthe lInventory lcontrol
systems, lthe lstaff lwho lresponsible lfor ladministration
of linventory Enquiry lWarehouse lManager labout lthe
process land lcriterial ltha lthis ldepartment luse lto
determine lreorder lgood llevel’’
Review lthe lfile lof lInventory lrecord. lA leffective
control lwill lprovide lthe llist lof linventory lwith ldetail
quanlity, ldesciption land lassessment lrelated lto
quality lof lwarehouse lstaffs. l’’
Inspect lthe lCounting lreports land lInventory lbalances
of. lFor lany ldifference, lobtain lthe lexplaination lfrom
manager land ltheir lsolution. l’’
Inquiry lPayable laccountant labout lthe linstruction
that lthey lare lfollowing lto lrecored lpayable. l’’
Inspect lall ldocumenations lrelated lto lPayment
process.If lcontrol lis leffective, lthere lneed lto lhave la
separation lof lduties. l’’
Review lthe lfile lof lreconciliations lfor levidence lof
regular lperformance land lreview lby lseinor lfinance
team lmembers. l’’
While lreviewing lall lsuporting ldocuments lrelated lto
payment, lan leffective lcontrol lneed la llist lof ldetail
Accoung lpayable lto leach lsuppliers. l’’
III. Draft audit report
Report on the Financial Statements
To: lTHElSHAREHOLDERS l lOF lBINH l lANH l lJOINT lSTOCK llCOMPANY
We have audited the accompanying financial statements of Binh Anh Joint Stock
Company (“the lCompany”), which comprise the Balance Sheet, the Statement of
Profit and Loss, the Cash Flow Statement for the year then ended 2018, and a
summary of the significant accounting policies and other explanatory information.
Management’s Responsibility for the Standalone Financial Statements
The Board of Directors is responsible for making and presenting truthfully and
reasonably the Company's financial statements in accordance with Vietnamese
accounting standards, accounting regime (business) and related legal regulations.
regarding the preparation and presentation of financial statements and is
responsible for the internal control that the Board of Directors determines is
necessary to ensure that the preparation and presentation of the financial
statements are free from material misstatement by time fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial statements based on
the results of the audit. We conducted our audit in accordance with Vietnamese
auditing standards. These standards require that we comply with ethical
standards and regulations, plan and perform the audit to obtain reasonable
assurance about whether or not the Company's financial statements are obtained
a material misstament.
An audit includes performing procedures to obtain audit evidence about the
amounts and disclosures in the financial statements. The procedures selected
depend on the auditor's judgment, including the assessment of the risks of
material misstatement of the financial statements, whether due to fraud or error.
When conducting these risk assessments, the auditors reviewed the internal
control of the Company regarding the preparation and presentation of honest and
reasonable financial statements in order to design appropriate audit procedures.
With the actual situation, however, it is not intended to give an opinion on the
effectiveness of the internal control of the Company. An audit also includes
evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by the Board of Directors as well as
evaluating the overall presentation of the financial statements.
Opinion
In our opinion, the financial statements reflect truthfully and reasonably, on the
critical aspects of the ABC Company's financial situation at 31/12/2018, as well as
its business results. and the cash flow situation for the fiscal year ending the same
day, in accordance with Vietnamese accounting standards, accounting regime
(business) and legal regulations relating to the preparation and presentation of
financial statement.
Basis for qualified opinion
We have found errrors in the payable ledger and the individual accounts of
suppliers making up the trade payables balance, the total of which is material to
the statement of financial position. By taking physical count, we have found that a
large portion of inventory maybe obsolete.

Hanoi, February 15th, 2019

AIC Audit Firm Auditor
General manager:
IV. Management letters
MANAGEMENT LETTERS
To: Board of Directors and Board of Managament
BINH ANH COMPANY

We have completed the audit of the Financial Statements for the fiscal year
ended 31/12/2018 of Binh Anh Co ("Company"). In this process, we conducted a
review of the internal control and accounting system of the Company. Issues that
we think you need to consider are mentioned in the attached Management
Letter. The main purpose of this work is not to detect weaknesses, seek fraud and
errors of the Company but to help us make our audit opinions and therefore
should not be relied upon to conclude There are no other disadvantages.

This management letter includes our observations of current procedures and

policies and our suggestions for improving Company processes. We discussed our
suggestions with the Board of Directors. The opinion of the Board of Directors is
reflected in the Management Letter under the heading "Comments of the
Company".

However, we also note that the issues mentioned in this Management Letter are
the result of conducting a regular audit so that we can provide an audit opinion
on the Company's Financial Statements. Therefore this Management Letter does
not cover all defects that may exist in the Company's internal control and
accounting system.

This management letter is only for the use of [Board of Directors of Binh Anh Co]
and is not intended to provide information to any third party to use. Therefore, it
is inappropriate to provide this Letter to third parties without our written consent
and in that case we will not be liable for any decision of the party. thirdly because
of using a copy of this Management Letter.

On this occasion, we thank the cooperation and help of the Company in the
auditing process. If the Company needs more information about our suggestions
or any other assistance, please contact us
Sincerely,
AIC
Contents
1. Business plan
Observations
- Company open some new stores in small cities without considering some
shareholders’ protest
- Manager's perception of internal control is not good
Implications
- Business performance is not as expected
- The devaluation of stock
Recommendations
- The business decision must have a strategic and thorough discussion
- Raise awareness of management about internal control
2. Inventory system
Observations
- The slow- moving condition
- Inventories is not classified reasonably according to desscriptions of each
type of categories
- Camera system has not worded for months and no warehouses restriction
- No qualitities consideration
Implications
- Inventory can be obsolete
- It takes time for the delivery of goods circulation, not good for business
- Stealing inventories may occur
- quality of goods is not guaranteed
Recommendations
- Increase sales ability
- Set up logistics system
- Fix camera system and control of entering warehousing
- Qualities deparments or function must be set up

3. Payable account
Observations
- The monthly account payable listing is not used
- Suppliers statement reconciliations have not always been performed by the
client
- Invoices were often not approved before payment
- Error in the payable ledger and the individual accounts of suppliers making
up the trade payables balances
Implications
- The client do not use payable listing, so that it is difficult for them to detect
the difference between bank reconciliation and their payable. This
problems can lead to risk of frauds
- Reconciliation monthly, annually with suppliers is compulsory, but the
client do not. It can lead to the the different payable account and cash
outflow
- Invoices which aren't being approved are unavailable, so that the
disapproval of invoices can lead to the omission of assets, or even frauds
- Because the total of trade payable is material to the statement of financial
position, error in the payable ledger and the individual accounts can lead to
the deviation of financial statements. Even though it is an error, but it can
results in risk of frauds
Recommendations
- A monthly account payable listing should be introduced. Payments should
be marked off. This would provide control over unpaid invoices and a
means for regular control account reconciliation.